The XJO is expected to open strongly higher this morning following a similar move from the U.S. on Friday. Their futures also closed marginally in the green, indicating at least that the rally isn’t being immediately met with profit-taking. They are closed tonight, so we can only monitor their futures to see how they continue to digest the positive news of the early-stage agreement to raise their debt ceiling.

The U.S. closed at its recent peak and therefore key resistance. Coupled with their public holiday tonight, our market likely won’t get ahead of itself. It should also be noted that our market has diverged against the U.S. over the past month or so. Their market looks to have a bullish slant to it, whereas our market looks to have a bearish slant to it.

Our opening should bring us right back into flirting with the previous tight consolidation range that had our market enchanted for most of May. 7,200 to 7,230 remains the floor, which we should contend with this morning on open as a potential resistance. If we push through back into the range, then 7,270 to 7,300 remains the ceiling. And finally, 7,250-ish is roughly the comfort point that we may simply park ourselves at today as we wait and see how the U.S. reacts at resistance.

It was finally good to see some movement though, with virtually all the volatility having left our market bar a few sparks here and there for almost all of May. The saying “go away in May” in the past typically meant selling, but this year investors took it too literally. With the debt ceiling issue concluding, markets will now turn virtually 100% of their attention back to inflation story and monitoring key economic data.

In the week ahead: we have Lowe testifying to the government on Tuesday and Wednesday. On Wednesday morning we have U.S consumer confidence, and during our session, we have local CPI (YoY), local private sector credit, and manufacturing data from China. On Thursday morning we have the start of U.S jobs data, more Chinese manufacturing data during Thursday day, and Eurozone CPI and further U.S employment data Thursday evening. To finish off the week, on Friday morning we have U.S PMI data, and the rest of U.S employment data in the evening. All in all, a busy week of data that should help keep markets energized. We remain in a cycle where weak economic data is positive for markets, as it reduces the likelihood of further rate rises.

US Markets

US shares closed higher on Friday as a debt ceiling deal came closer to completion. In the end, the deal was signed over the weekend. US economic data was also largely positive on Friday, though the data was perhaps a little inflationary. Markets are likely to remain optimistic over the short term as the debt ceiling issues have been resolved, but over a more medium term, worries around persistently high inflation and the likelihood of further rate rises may return and send markets back down. US markets will be closed tonight for the Memorial Day holiday.

Eight of the eleven sector groups of the S&P500 closed higher on Friday, with Discretionary, Technology, and Communications stocks as the best performers. Energy stocks fared the worst after recent weakness in oil prices.

The S&P500 returned to the top of the sideways consolidation range at 4,200 on Friday. Should we see a break above the resistance at 4,200 will likely see an uptrend for the S&P500, with a possible upside target of 4,300.

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